Case Study 8

Erros Pharma Products Performance Appraisal

Chapter 8
Management of Performance Appraisal System
Problem

Roger Acero, Edwin Santos and Maurine Calzado who were the most activist in the
company were not satisfied with their ratings. They complain directly to the president about their
ratings result in the performance appraisal that was quite low and they were not given salary
adjustment during the midyear performance review. They think that the procedure and result of
the performance appraisal is biased and their ratings did not accurately represent their
qualifications and experiences.

The president was triggered because these three employees were former members of an
activists’ union in another company threatened to form a union as result of the performance
appraisal. He needs to find a way to resolve the problem and to come up with a satisfactory
solution.

Case Facts

 A performance appraisal has been regularly conducted at six month intervals using the
Graphic Rating Scale.
 The company uses the five point rating scale and the factors evaluated are quality of
work, quantity of work and observable factors as initiative, leadership, responsibility and
dependability.
 Two supervisors rate the employees and the average of the two raters becomes the basis
for salary evaluation.
 Roger Acero, Edwin Santos and Maurine Calzado who were former members of an
activists’ union in another company threatened to form a union in another company
threatened to form a union as result of the performance appraisal.
 They argued that adjustment in salary should be uniformly made regardless of
performance.
 They further stated that their rating did not accurately represent their qualifications and
experiences.
 They also stated that other employees received salary adjustments because they are
favorites and buddies of some supervisors and others are closely related because they
come from the same region.
 The president was alarmed and did not want any union to prosper in his company.
 He is paternalistic but was firm in the belief that performance appraisal is important
component in all management programs.
 He believed that employee should be evaluated periodically to find out their performance
and this should serve as basis for all personnel actions including termination if so
warranted.
 He called all the managers and supervisors to a closed door meeting to discuss the
problems and he is in deep thought on how they could resolve the problem and come up
with a satisfactory solution.
Analysis/Hypothesis

Effective performance appraisal system can lead an organization to take strides towards
success but an ineffective performance appraisal system can seal the fate of the organization by
creating chaos and confusion from the top management to bottom in the organization. Khan
(2005). An effective appraisal system can identify an individual’s strengths and weaknesses and
indicate how such strengths may be utilized and weaknesses overcome to realize the
organizations success, Mullin (1996). This ensures that the best employees are retained by the
organization therefore leading to customer satisfaction and effective succession planning, Mellon
(2006). There is a relationship between performance appraisal and job satisfaction because
employees will be more satisfied when they feel the appraisal system is fair for the work they
have done and the rewards are for genuine contributions and consistent with the reward policies
of the organization, Ishigaki (2004). Effective appraisal system makes workers more satisfied
and committed to their jobs, Luthans (1998).

There are various approaches to the development of performance instruments that could
be used by different organizations depending on their goals and objectives. Some performance
instruments focus on employee attributes, behavior, and results and some are focused on overall
comparison of individual performance. Other organizations focus on quality and quantity of
worked performed and some observable characteristics in the performance of their jobs. The
following are the approaches used by various organizations:

The first approach is the comparative approach. The comparative approach of

performance measurement consists of techniques that require the rater to compare the
individual’s performance with others. These techniques are Ranking, Forced Distribution
Technique, Paired Comparison Technique and the Checklist Method. In Ranking Technique, the
employees to be rated are ranked from the most efficient to the less capable in each traits or
quality used judging the employees performance. The Forced Distribution Technique, in this
system uses a five-point job performance scale in rating employees who are doing similar jobs.
In Paired Comparison Method, under this method the name of each employee who is to be rated
is written on the card. Each employee to be rated is then off paired with every other employee in
the same unit. And in the Checklist Method, it provides a number of traits or factors with
corresponding definitions for evaluating the employees written in the left hand column of the
form such as quantity of work done, quality of work, attitude towards work, judgment,
reliability, cooperation, punctuality and others.

The second approach is the behavioural approach. The behavioural approach of

performance management attempts to define the behavior an employee exhibits to be effective in
job. The various techniques define these behavior are the Critical Incident, the Behavior
Anchored Rating Scale and the Organizational Behavior Modifications. The Critical Incident
Approach requires managers to keep a record of specific examples of effective and ineffective
performances on the part of each employee. The Behavioural Anchored Rating Scale is designed
to specifically define performance dimensions by developing behavioural anchors associated
with different levels of performance. And the Organizational Behavior Modification entails
managing the behavior of the employees through a formal system of behavioural feedback and
reinforcement.
 The third approach is result approach. The result approach focuses on managing the
objectives, measurable result of a job or work group. This approach assumes that subjectivity can
be eliminated from the measurement process and that results are the closest indicators of ones
contribution to the organizational effectiveness. The two performance management systems that
use results are the Management by Objectives (MBO) and Productivity Measurement and
Evaluation Systems (PROMES). The Management by Objectives (MBO) is used in most
companies who believe in results as bases of performance management while the Productivity
Measurement and Evaluation Systems (PROMES) is the goal of this system of measurement is to
motivate the employee to go for a higher level of productivity.

In this case, the Erros Pharma Products performance appraisal used the Graphic Rating
Scale .A Graphic Rating Scale (GRS) presents appraisers with a list of dimensions, which are
aspects of performance that determine an employee's effectiveness. Examples of performance
dimensions are cooperativeness, adaptability, maturity, and motivation. Each dimension is
accompanied by a multi-point (3, 5, or 7) rating scale. The points along the scale are defined by
numbers and/or descriptive words or phrases that indicate the level of performance. The
midpoint of the scale is usually anchored by such words as “average,” “adequate,” “satisfactory,”
or “meets standards.” (Kane and Lawler, 2009). Many organizations use graphic rating scales
because they are easy to use and cost little to develop. HR professionals can develop such forms
quickly, and because the dimensions and anchors are written at a general level, a single form is
applicable to all or most jobs within an organization. Graphic rating scales do present a number
of problems, however. Such scales may not effectively direct behavior; that is, the rating scale
does not clearly indicate what a person must do to achieve a given rating, thus employees are left
in the dark as to what is expected of them. For instance, an employee given a rating of 2 on
“attitude” may have a difficult time figuring out how to improve (Meyer, 2001) Graphic rating
scales also fail to provide a good mechanism for providing specific, nonthreatening feedback.
Negative feedback should focus on specific behaviors rather than on the vaguely defined
dimensions the GRSs describe. For example, if told that they are not dependable, most
employees would become angered and defensive; they would become less angry and defensive if
such feedback were given in behavioral terms.
Organizations commonly use the graphic rating scale. It is a user friendly and can be a
quick process, the method is easy to understand; standardization of the comparison criteria’s and
behaviors are quantified making appraisal system easier.
No performance appraisal system is perfect, and the graphic rating scale is no exception.
The graphic rating scale introduces room for judgment error. There are several different forms of
rater errors that occur during performance appraisals. While many of the errors are unintentional,
the errors have an impact on how the employee is evaluated and whether or not the evaluation is
an accurate representation of the performance. Unfortunately, it is very difficult to take the
judgment out of graphic rating scales. Because each rating typically has a small label such as
“Poor” or “Excellent,” It is difficult for managers to rate employees without making a judgment
call. Rating behaviours may or may not be accurate as the perception of behaviours might vary
with judges, Difficulty in rating: Rating against labels like excellent and poor is difficult at times
even tricky as the scale does not exemplify the ideal behaviours required for a achieving a
rating;Perception issues: Perception error like Halo effect, regency effect, stereotyping etc. can
cause incorrect rating; they are good at identifying the best and poorest of employees. However,
it does not help while differentiating the average employees and not effective in understanding
the strengths of employees. Different employees have different strong characteristics and these
might quantify to the same score.
In Erros Pharma Products, The Company uses the five point rating scale and the factors
evaluated are quality of work, quantity of work and observable factors as initiative, leadership,
responsibility and dependability. Two supervisors rate the employees and the average of the two
raters becomes the basis for salary evaluation.

Roger Acero, Edwin Santos and Maurine Calzado does not satisfied with the result done
in performance appraisal maybe because for them it only involves two supervisors involve in
evaluation and they are not close with those supervisor. It happened that only the two supervisor
is involve in evaluation, favouritism might be possible occur and it will lead to biased result.
Their ratings are quite low compared to the other employees. They were not given salary
adjustment while the other employees who were favorites and buddies of some supervisors and
some are related because they come from the same region received salary adjustments.

In the contrary, maybe these three employees is really the problem. The two supervisors
were not biased. The result of the performance appraisal is accurate and factual that they really
had a quite low rating, low work performance and not responsible to their job. In fact among the
450 production employees and 30 sales distribution people who were evaluated, these three
employees only complain about the result. And it stated that these three employees were former
activist in another company threatened to form a union as a result of the performance appraisal.
And how can be the performance will be disregard in adjustment of salary since performance is
one of the bases in rating the employees. These three employees do not respect the performance
appraisal system of the company.

This conflict does not arise and happened if only at the beginning the HR do not hired
these three activist employees. These three employees had already a bad record on their previous
company for being activist. Then why the HR still hired them despite of this information. Maybe
the HR something lacking in gathering information or background check through asking the
character references of these employees from their previous company.

Alternative Courses of Action

To resolve this problem, the supervisor should try to listen and try to understand the
problem and dissatisfaction of the employees. Then should try to explain and clarify to them the
appraisal performance system of the company and the result. Enlightened to them that
performance appraisal is done for them to evaluate and for the organizations growth. The HR
with the support of the top management should provide for challenges and review the
performance appraisal. A grievance procedure should be put in place since the three employees
is not satisfied with the rating giving to them. Since they threatened to form a union as result of
the performance appraisal, the union representative should be entitled to challenge personnel
decisions.
The company could still use graphing scale method but the format and procedure should
be modified and standardize. They should develop standards for each job to avoid bias.
According to the appraisal system in most of the cases only the supervisors of a particular
employee appraise his/her subordinate’s performance and in this process biasness can occur. To
solve these types of problem the company can appoint employees in HR department who will
observe the performance of employees’ on regular basis. The management of company should
ensure that employees must understand it and feel that this is a fair way to evaluate performance.
To ensure that evaluation system to work well, the company may form committee, which should
study the rating forms and make it as simple as possible by avoiding unnecessary complexity.

The President is paternalistic but was firm in the belief that performance appraisal is
important component in all management programs. But if the performance appraisal is the root
of conflicts, he can make a decision to not conduct a performance appraisal in the future to avoid
the conflict to rise again.

If the problem still cannot resolve after the re-evaluation and review of the performance
appraisal, the harsh way to resolve this problem is to terminate the employees who are activist to
prevent this type of conflict to rise again.

Suspend the supervisors if they were proven that they are biased on their subordinates’
performance appraisal.

Recommendation and Conclusion

The performance appraisal should be reviewed. The company could still use graphing
scale method but the format and procedure should be modified and standardize. According to the
appraisal system in most of the cases only the supervisors of a particular employee appraise
his/her subordinate’s performance and in this process biasness can occur which resulted the
employee dissatisfaction. To solve these types of problem the company can appoint employees in
HR department who will observe the performance of employees’ on regular basis. In order to
make the system fair and unbiased the Erros Pharma Product should eliminate personal biases
from the system as soon as possible. For the evaluation system to work well, the management of
company should ensure that employees must understand it and feel that this is a fair way to
evaluate performance. To ensure that evaluation system to work well, the company may form
committee, which should study the rating forms and make it as simple as possible by avoiding
unnecessary complexity. For rating ‘outstanding’ to ‘poor’ a clear standard should be introduced
by the management committee.

Organizations can assist employees in more accurate ratings by providing either training
or defining what is meant by “poor” or “excellent.” A common form of training for performance
appraisals is known as frame of reference training. In this training system, employees are given
clear and specific examples of behaviors and performance that fit into each category so that
when employees complete performance appraisals his or her ratings are accurate reflections of an
employee. The human resources department during orientation should make sure that employees
know what is expected of them when they are hired and educate employees how their
performance will be evaluated.
 Case Study 9
The Tennis Match

Chapter 9
The Management of Employee
Benefits and Services
Problem

Case Facts

 Noel is a computer programmer at Jonadel Corporation.

 He was delighted to know that part of the companys’ athletic program is a mixed double
tennis tournament to be held at the corporate tennis court.
 Grace, who works in the same department, used to play with Noel in many occasion and
the two would like to compete in the tournament.
 They feel that there is a great chance to win the annual tennis competition.
 There is a growing interest among employees who are tennis players in the corporation as
it develops more productivity at work.
 The management themselves are all tennis enthusiasts.
 The tournament is scheduled on Friday afternoon and management declared this as a
“tennis holiday”.
 It is a day of fun and workers can cheer for their respective teams.
 Management supported the program with free snacks and fun fair to make the occasions
memorable.
 It was a four-consecutive-Friday tournament.
 Noel and Grace advanced to the final round.
 They were leading I the third set which was the deciding point.
 On a smash, Noel twisted his ankle badly.
 Noel’s injury became worse and he had to be confined in the hospital for 2 days as the X
ray results showed hairline fractures.
 Noel missed two days of his work activities.
 He has no more sick leave or vacation leave because company policy and ECC policy do
not cover non-related work accidents.
 Workers’ compensation provides payment if the worker is functioning within the scope
of employment.
 Case Study 7
The Unhappy Supervisor

Chapter 7
Wages and Salary Administration

Problem

Case Facts

 Miss Joan Santos, a computer programimer in Manadel Corporation for more than six
years now, was discussing her salary situation with Mr. Rederick Santiago, her manager.
 Miss Joan was unhappy because she did not receive any salary increase last salary
evaluation, while some employees who were recently hired got an increase from ten to
fifteen percent.
 Miss Joan’s performance has been considered very satisfactory for the last five years and
previous to this she got very substantial increase in salary due to important programs that
she made for the cooperation related to accounting and personnel matters.
 She made a lot of improvements in the purchasing systems and systematized inventory
records in materials management.
 The management had recently started a comprehensive job evaluation program and some
positions are aligned within the salary grade approved by the management committee,
where Mr. Roderick Santiago is also a Member.
 Mr. Santiago explained to Joan hat her salary was already way above the salary grade for
the position evaluated and allocated in the salary plan; hence, she will not get any
increase at the moment until the salary range can catch up to her level in the salary plan.
 Mr. Santiago also explained that she is the most senior among the programmer and that
instead of cutting her salary back to the job range, they are considering her for an
incentive bonus, which is not as substantial as that of her co-worker’s in the department
who are new in the positions.
 Miss Joan is not satisfied with the program explained by Mr. Santiago.
 The whole night she planned to file a leave of absence despite the many rush programs
assigned to her.